More and more people are putting their savings into the stock market, and that's a good thing! If you yourself want to invest in stocks, but find it a bit difficult to get started, you have come to the right place.
In this article, we will take a closer look at what stocks and shares are, why it can be profitable to save in stocks and mutual funds, how to make a risk assessment and how to analyze a stock to make a good investment.
Finally, I will share my recommendation for which proven, simple and successful investment strategy you can adopt, as well as the best online broker to buy and sell stocks. Then you can get started already today, with a good plan under your belt!
Get started with investing at Nordnet
I recommend Nordnet because of their large selection of shares and funds, low fees, good learning resources + free access to the share forum Shareville (ad).
But before we get that far, we need to have the basics in place.
So let's start by answering the following questions:
What is stocks?
A share is an ownership stake in a company. If you own a company's stock, you therefore own a piece of the company, which gives you the right to participate in the general meeting and have the right to vote.
The shares can also give you dividend, which is part of the company's profits which are distributed to shareholders.
A company's shares can be traded on the stock exchange, and the price of the shares changes based on demand and supply in the stock market.
Why you should invest in stocks and mutual funds
There are plenty of good reasons to save in stocks and funds. Firstly, owning shares have historically given higher returns than savings in having your money docile in the bank, or the bond market.
The reason for this? If you own shares, you also have the opportunity to be part of the company's growth and success.
If the company does well, its share price may rise as a consequence. In other words: you can make money. In addition, investing in stocks give you the opportunity to diversify your portfolio, if you already own property or other assets.
The first thing you have to do to be able to start with share savings is to create a share account. In Norway, we have different variants, but the most common are VPS account and Aksjespare account.
Aksje Spare Account (ASK)
If you are going to invest in Nordic and European stocks, and you live in the region, this account is a good solution for you.
Here, you avoid paying immidiate tax on returns and dividends as long as you do not withdraw the winnings from your account. That means you can reinvest more of your money, and therefore provides a big advantage.
The disadvantage is that if you sell at a loss and want to get a tax deduction, you have to close this account in order to claim the deduction.
VPS Account
A VPS account gives you the opportunity to buy a wider selection of shares, funds and ETFs. Among other things American stocks.
Here you have to pay tax on your return when realizing the gain.
You can read more about the technical aspects of how to get started with shares here .
Investeringskonto Zero (Nordnet)
Suitable for those who want to save in both shares, mutual funds, ETFs, combination funds and fixed income funds, and who want the benefit of deferred tax.
Here you can also invest in American stocks.
Read more about their different account types.
Get started with investing at Nordnet
I recommend Nordnet because of their large selection of shares and funds, low fees, good learning resources + free access to the share forum Shareville (ad).
How much risk are you comfortable taking?
Risk comes from not knowing what you’re doing.
Warren Buffett
As with all investments, it is important to carry out a good risk assessment before buying shares.
This involves considering:
- How much risk you are willing to take
- How much of your savings you want to invest
- Whether you are going to invest in several assets, such as funds, commodities, property to diversify your money
Remember that the stock market can be very volatile and that share prices can fluctuate sharply. It is therefore important to have a long-term investment horizon, and not to be influenced by events that affect the stock market in the short term.
Since the stock market fluctuates, you should not invest money that you will need in the near future - for example if you are going to buy a home.
It is also important that you familiarize yourself with the various risk factors that affect the companies you are considering investing in.
And we will look at that a little further in the next section.
Analysis of stocks
In order for you to be able to make good investment decisions, it is important that you make a thorough analysis of stocks you are considering buying.
This involves examining the company's financial situation, the competitive situation, industry opportunities and risks.
There are several tools and methods you can use to analyze stocks, such as looking at the company's financial statements and reading analysts' reports about the company. You should also keep up to date with news and developments in the company and the industry.
When analyzing a company, consider the following factors:
- Financial situation: Look at the company's earnings, operating result, liquidity, debt ratio and cash flow. Stability and predictability are keywords
- Competitive Advantage: Look at the company's market share, competitors and industry opportunities
- Management and ownership: Look at the company's management and ownership, and assess whether they are competent and have a good track record
- Growth Opportunities: Look at the company's growth potential and how they plan to exploit this
- Risk: Look at the various risk factors that can affect a company, such as government regulation, high debt, failed acquisitions, declining revenues, etc. Check out my free tools I have developed some free tools for those of you who are interested in investing in shares - including a checklist of useful factors you can use when analyzing shares. Check out the list and the other products by clicking on the image below.
A good investment strategy you can use
The investment strategy that has proven to be a successful method over time is Dollar Cost Averaging (DCA)
Dollar cost averaging is an investment strategy which means that you buy shares regularly, for a fixed amount, regardless of the share price.
For example, that you decide to invest $200 on the 15th of every month for the next 30 years. And yes, that means that sometimes you will buy at a peak, and at other times you will buy at a trough.
But over time, shares and mutual funds have been shown to move upwards, and this strategy ensures that you will at least follow the average upwards, as the picture below illustrates.
The strategy can help smooth out purchase prices over time, which can reduce the average purchase price of your shares.
Dollar cost averaging requires a long-term investment horizon and the discipline to follow the strategy over time.
Buy shares on Nordnet
Once you have found the stocks you want to buy, you can do this through a stockbroker such as Nordnet.
Nordnet is one of the leading stockbrokers in the Nordics and offers a simple and user-friendly platform for buying and selling shares.
To buy shares on Nordnet, you must create an account, verify your identity and deposit money into your account. You can then easily search for and buy shares via Nordnet's website or app.
Want to learn more about investing?
Then I recommend you look through my blog for more interesting content about saving and investing.
For example, you can take a look at:
